What happens when "Junior" is ready to lead and Dad's not ready to let go?
The furniture industry is full of wonderful family stories that unfold as one generation eases out of the day-to-day business operations and the next prepares to take over. In many ways this changing of the guard represents the quintessential American success story. Some of these businesses are in their third or fourth generation of family leadership, with each generation adding its unique character to the culture of the business. Often, the latest generation is more highly educated and brings to the business the most current thinking in management, marketing and organization.
In these businesses, the older generation has usually planned (and plan is the key word here) for the succession for some time. They carefully established a succession plan and prepared all family members for changing roles by building an organization founded on respect for all parties, including employees as well as family members.
But what about those organizations that have not planned well? What happens when the younger generation is motivated to take over, yet the older generation is not quite ready to let go? Unfortunately, we also encounter a lot of these kinds of companies and to use a tired phrase it ain't a pretty picture. Everyone has heard of or seen families divided and thrown into dysfunction and resentment by the stress resulting from low trust and respect. Coupled with the giving up of power, these issues have caused as many small family businesses to falter or fail as have competitive, financial or market conditions. The affect on family relationships of this kind of stress can be long lasting and devastating.
So, how can family businesses avoid these destructive problems? How can owners ensure that their sons and daughters are deserving and prepared to take over the leading roles without feeling that their businesses and future earning power will be in jeopardy? How can the younger generation establish itself as being capable of inheriting what is usually a substantial amount of responsibility and, at least potential, wealth?
Of course, the first order of business is to make sure that the retailer's financial house is in order. Every independent family business owner should work with a qualified estate planning expert to assure that the interests of all family members are met, with minimum tax implications and a maximum of fairness. The primary goal of estate planning is to ensure that the company's assets are preserved and distributed according to the owner's wishes. It is important for the owner to make his or her wishes clearly defined. Who gets what and when, needs to be spelled out in detail. Where more than one child or heir is involved, things can get very sticky and unpleasant for the heirs who end up running the business.
But, the real benefit of financial and estate planning is that it forces the owner to face these difficult issues while still alive and involved. In determining how the business will be passed on, owners have to think about which of the heirs will lead, and how to best prepare other family members for the future structure. Of course, the future leader will have to be trained and prepared for his or her new role. Making sure that this is understood early is an important element in developing a successful relationship between parents and children who work together in the family furniture business.
The situation that causes the most trouble occurs when members of the older generation participate in day-to-day business operations along with their adult children who are usually in their thirties or forties. These children have already been in the business for 10 years or more. While some notable companies in our industry have handled this situation well, many more have not. This is the real subject of this article.
The Importance of Structure
In preparing for this article I talked with several of the consultants on our staff who work to help families in our industry through the problems of succession. In virtually every case, the primary problem was a lack of structure in the business. Without structure, it is not possible to have a clear separation of duties and responsibilities. In a business without structure, everyone feels responsible for everything. This leads to people bumping into one another and confusion about policies, procedures and, more significantly, purpose, mission, beliefs and vision. You know that vision thing.
Organize for Family Stability
Families tend to be autocratic, and while some family organizational matters may not seem clear to outsiders, those inside usually understand perfectly. Issues such as "who wears the pants in this family" are very clear to family members. Friction often occurs, and this struggle is at the heart of family business problems. Power struggles between fathers and sons or fathers and daughters or mothers and sons get carried over into the business. They result in much stress and employee dissatisfaction, which leads to costly turnover and lackluster performance.
A Family businesses should not be run like a family, if the intention is for it to last beyond the founding generation and remain successful. This means that it must be organized so that all jobs, responsibilities and accountabilities are spelled out and written down. The definition of "success" in each job area must be clearly understood, so that the management team (family) will know when a member has performed their job well. You should also go through this process for all non-family employees.
Everyone deserves to have a complete job one defined in writing where specific duties are clearly spelled out and where expected results are stated. Expectations should be as objective as possible so that results can be measured or clearly demonstrated. This job definition should form the basis for the person's performance appraisal. In family situations, where the performance of family members is being appraised, this objectivity is of crucial importance.
Use the following six primary areas and sub-areas to help you break down the task of building job definitions:
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Finance managing the company's assets, cash flow, and investments.
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Sales the primary function of the business.
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Operations including administration, office, human resources.
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Logistics including warehousing and delivery, floor stocking.
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Marketing advertising, public relations, communications.
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Merchandising including purchasing, inventory planning.
Form a Management Team
Every large business has a management team. Every small business should too. Family businesses tend to operate in unstructured environments because the owners simply like to function without boundaries or job limitations. This "freedom" is deceptively appealing. It is seen as a major reason to own a private, family business, but what is always missing in these situations is accountability. With no one to hold owners and family members accountable for performance, businesses drift. They depend more upon the whim of the owner/leader than on proven business management methods aimed at achieving goals.
A management team should include the owner and all other family members in positions of leadership plus all non-family department heads people in charge of important areas of the business such as warehousing, delivery, operations, office, etc. The team must be the highest level of management to whom all areas of store operations report. If there is a head of operations to which the office manager reports; the head of operations would be on the team but the office manager would not.
The management team first must clearly define its areas of responsibility and accountability. The result will be that each member will have a specific portfolio to manage. This team will make all strategic decisions for the company and will gather their resources to achieve goals and solve problems that affect the organization. The team should meet to determine the most important issues affecting the productivity, performance and environment of the company and select one key, pervading issue to be resolved at a time. If an issue is important enough, all efforts and resources should be engaged to resolve this problem or opportunity. Each management team member should walk away from the team meeting with specific action plans that include time limits for his or her area of responsibility. When the team meets, only this one issue should be discussed. A meeting should last no more than one hour. Every member reports on his actions and sets new ones for the next meeting.
In a small business, the leader of the management team is usually the owner, but need not be. By allowing the next generation to chair the team, the present owner or older family member can act as an advisor/teacher to the team. He or she can even take an active role as a working member. This method can be a very powerful way to ensure that the company can evolve in a planned way. It will also help the mature manager to gain a feeling of security as the management team develops in knowledge, maturity and effectiveness.
Where the Heart is
While there are many ways to plan for management succession, one of which is offered above, there is one issue that no amount of management training or outside consulting can fix. In every contentious family situation we've encountered we have had to ask the reluctant owner "Where is your heart?"
Problems arise in family businesses that have been owner-centered for decades, where the owner has derived his or her self-worth from the operation of the business. The difficulty occurs when the time comes to give all or some of the power and control over to children . All of the structure and professionalism in the world won't help in a situation where the older generation owner has no self worth that resides outside of the company.
These owners will say that they want their children to be involved and to take over, but rarely do they have the inner strength of character to really make it happen to act as sage advisor, as the family elder, teacher and coach. The worst problem in these situations is that because of the owner's inability to let go, the new generation is usually not prepared for the responsibility and the cycle of contention is continued. If you are reading this as an owner who can't let go, answer that question "Where is your heart?"